Alaska's 'Leaking' economy.

• Author: Chepurko, Iuliia
• Position: ALASKA TRENDS

One way to develop an economy is to increase the amount of locally-made products that can replace items that would otherwise be shipped in. This is known as import substitution, a time honored and somewhat controversial tool for developing economies, dating back at least to Alexander Hamilton's tariff to protect small US manufacturers from cheaper British goods. Import substitution helps create a self-sufficient economy and decreases "leakages" that occur when paying for imported goods. The concept suggests strategies to develop industries within a region that could replace imports and reduce dependency on goods produced elsewhere.

Local Demand

In Alaska, 36 percent of local demand is met by imports from the Lower 48 (referred to as domestic imports) or from other countries. The top three products imported to Alaska from other countries are oil or petroleum derivatives (54 percent of imports), and the top three export products are zinc ores (21 percent of total), lead ores (7 percent of total), and frozen fish (7 percent of total).

Looking at different economic regions within the state, Southwest Alaska has the highest share of local demand met by imported products at about 75 percent. Next is the Gulf Coast region (55 percent) and Northern region (53 percent). Anchorage and the Matanuska-Susitna Valley, with more developed infrastructure and a larger industrial base, has the lowest dependence on imported products--only 33 percent of local demand is covered by goods from the Lower 48 and other countries.

High Dependency

In general, the more remote a location, the higher the import coverage of local demand. What is noticeable is that the same regions that have high dependency on imports also export most of the goods produced locally. For example, the...